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Here are highlights from Monday's Analyst Blog:
DSCM What the Doctor Ordered
Drugstore.com's (Nasdaq: DSCM | Quote | Chart | News | PowerRating) second quarter sales were better than expected, and its net loss of $0.02/share was in-line with consensus estimates. The company also maintained its full-year outlook of $490-$500 million in sales and a net loss of $3.0 million to a net profit of $1.0 million.
The management's strategy to focus on improving profit margins started to take shape in the second half of 2006. We expect these positive trends to continue for the next several quarters. The company's business model should be able to generate stable revenue and cash flow thanks to the large percentage of repeat customer orders, which accounted for 81% of its sales in the second quarter of 2008.
Intuit a Hold on Valuation
Intuit, Inc. (Nasdaq: INTU | Quote | Chart | News | PowerRating) is expected to report its fiscal Q4 and FY2008 results on August 21. Earlier, the company reported revenues of $1.3 billion in Q3:FY08, up 15% from a year ago, and surpassed our estimate of $1.28 billion.
Recently, the management announced a restructuring plan whereby the company will eliminate 7% of the workforce. They reiterated its guidance for revenues to come between $3.05 billion and $3.06 billion in FY08. However, GAAP EPS should come around $1.38-$1.40, down from the previous forecast of EPS around $1.42 $1.44. On a non-GAAP basis, Q4 EPS is now expected between ($0.07) and ($0.09).
Moody's Trading Near Fair Value
Moody's Corporation (NYSE: MCO | Quote | Chart | News | PowerRating) has a solid franchise in the rating of debt instruments, and has diversified itself with credit research and international growth. This has helped MCO offset declining ratings revenues, which fell 35% in the first half of 2008.
Although debt markets will likely be slow to recover, comparisons will become easier in the fourth quarter as MCO reaches the one-year anniversary of the current credit crisis. The company achieved its targets for Q2 and re-affirmed full-year guidance, leading us to believe further downside is limited. On the negative side, Moody's is facing increased competition from its peers and is likely to face additional expenses related to increased regulation.
Penske Steady in Tough Market
In the reported 2008 second quarter, Penske Automotive Group's (NYSE: PAG | Quote | Chart | News | PowerRating) earnings from continuing operations per diluted share were $0.42, down from $0.43 in the year-ago period. Revenue was steady at $3.4 billion. Same-store sales decreased 6% on new vehicles down 8% and used vehicles up 7%. The Company currently projects earnings from continuing operations for the year to be in the range of $1.54 to $1.60.
Penske is well positioned among the auto retailer peer group. Its specialty and luxury product mix offers opportunity for long-term growth. Additionally, we are encouraged by positive same-store sales in used vehicles. However, rising interest rates, challenging industry conditions and a leveraged balance sheet dampen our outlook on the stock. Thus, we rate the shares a Hold with a six-month target price of $14.00.
ArvinMeritor Spin-Off Positive
On July 29, ArvinMeritor Inc. (NYSE: ARM | Quote | Chart | News | PowerRating) reported third quarter results for fiscal 2008. Net income from continuing operations, excluding special items, was $0.70 per diluted share, compared to net loss of $0.06 per diluted share in the prior-year period.
Presently, the company is planning to spin-off its Light Vehicle Systems (LVS) business. The company is undergoing dramatic cost reductions through its profit improvement initiative "Performance Plus." The company is also expanding geographically and outsourcing to low-cost countries. This leads us to rate the shares a Buy with a target price of $17.00.
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